Hospitals with better credit ratings saw greater year-over-year declines in operating margins than those with lower credit ratings, according to an Aug. 3 report from Fitch Ratings.
Fitch said the median operating margin for nonprofit U.S. hospitals was 1.5 percent in fiscal year 2020, down from 2.3 percent in 2019.
However, the decline in operating margins was greater for hospitals and health systems with "AA" and "A" credit ratings. Fitch said the the "AA" credit category fell about 100 basis points and fell more than 100 basis points for the "A" category over the past year.
In contrast, hospitals with "BBB" ratings below investment grade categories saw incremental improvements in operating margins.
Fitch said hospitals with lower ratings likely saw some improvement for several reasons, including that many took immediate expense reduction efforts and recognized stimulus funding quickly. Fitch also said the smaller sample size may have contributed.
Fitch also said hospitals in the "AA" category "were generally more conservative in their CARES stimulus recognition and often did not engage in significant expense reductions."